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By: Jeffrey M. Haber A couple of months ago, we examined  NW Media Holdings Corp. v. IBT Media Inc. , 2023 N.Y. Slip Op. 30875(U) (Sup. Ct., N.Y. County Mar. 22, 2023) ( here ), a case in which a lower court addressed the question whether the destruction of millions of pages of data on a Google Workspace states a claim for trespass to chattels or conversion ( here ). As discussed in that article, the court concluded that the allegations concerning the destruction of such data sufficed to state a claim for conversion. NW Media  was again the subject of an article by this Blog, this time in the context of board deadlock – that is, when the members of a company’s board of directors are deadlocked regarding the vote on a matter of corporate concern.  NW Media Holdings Corp. v. IBT Media Inc. , 2023 N.Y. Slip Op. 03288 (1st Dept. June 15, 2023) ( here ). As discussed in that article, the Court held that the “motion court correctly granted IBT’s motion to dismiss the complaint” because defendant “Pragad lost his presumptive authority to initiate th action in the corporation’s name because NW Media’s board was deadlocked.” NW Media is once again the subject of an article, this time in the context of a motion to dismiss certain causes of action alleged against the defendants. IBT Media Inc. v. Pragad , 2023 N.Y. Slip Op. 05315 (1st Dept. Oct. 19, 2023) ( here ). In late 2016, plaintiff IBT Media, Inc. became the subject of a criminal investigation by the Manhattan District Attorney’s office. In 2018, when it appeared that plaintiff and its principal would be indicted, plaintiff decided to sell its membership interest in nonparty Newsweek to defendant NW Media, a company owned partially by defendant Dev Pragad and formed for the purpose of buying plaintiff’s interest in Newsweek. The transaction was documented in a September 2018 purchase agreement between plaintiff and NW Media. The purchase agreement, which contained a merger clause, stated that plaintiff agreed to sell its membership in Newsweek to NW Media free and clear of any claims or restrictions, and that the transaction would convey good title in Newsweek to NW Media. In or around late 2021, Pragad stated that he would not return NW Media’s ownership interest in Newsweek to plaintiff. Plaintiff sued, asserting a number of causes of action including declaratory relief (first cause of action), anticipatory breach of oral agreement (second cause of action), promissory estoppel (third cause of action), unjust enrichment (fourth cause of action), fraudulent inducement (fifth cause of action), breach of fiduciary duty (eighth cause of action), constructive trust (ninth cause of action), and equitable accounting (tenth cause of action). Defendants moved to dismiss the foregoing causes of action. The motion court granted the motion and plaintiff appealed. The Appellate Division, First Department affirmed. The Court held that the motion court properly dismissed plaintiff’s claim for a declaratory judgment, finding that the plain terms of the purchase agreement barred plaintiff from obtaining the relief sought. In that regard, the Court stated that the purchase agreement was “clear and therefore must be enforced according to its plain terms.” 1 As such, the merger clause, which was included in the agreement, “foreclose the introduction of parol evidence to vary or contradict the terms of the writing.” 2 merger clauses typically are found at the end of a contract or agreement, among the other “boilerplate” provisions, and, as such, are often neglected or ignored during negotiations. boilerplate merger clauses are given little weight by the courts. however, when the merger clause evidences a negotiation by the parties, courts accord such clauses more weight in determining the parties’ intent. in new york, the courts have required the parties to specify the agreements and matters being merged or integrated into their agreement. without such specificity, the courts have allowed parol evidence to be used to explain the parties’ intent, especially in cases involving claims of fraudulent inducement. 3 > merger clauses typically are found at the end of a contract or agreement, among the other “boilerplate” provisions, and, as such, are often neglected or ignored during negotiations. boilerplate merger clauses are given little weight by the courts. however, when the merger clause evidences a negotiation by the parties, courts accord such clauses more weight in determining the parties’ intent. in new york, the courts have required the parties to specify the agreements and matters being merged or integrated into their agreement. without such specificity, the courts have allowed parol evidence to be used to explain the parties’ intent, especially in cases involving claims of fraudulent inducement. 3 >  The Court also held that the motion court properly dismissed the promissory estoppel (third cause of action) and unjust enrichment (fourth cause of action) causes of action. 4 The Court reasoned that those claims were premised on the existence of the agreement between the parties – i.e. , the purchase agreement. Since “a valid written contract exists, and the relationship between the parties is therefore governed by that written agreement,” 5 plaintiff’s quasi-contract claims could not stand. 6 7 however, “where there is a bona fide dispute as to the existence of a contract or the application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies.” 8 > 7 however, “where there is a bona fide dispute as to the existence of a contract or the application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies.” 8 > The Court further held that the motion court properly dismissed the fraudulent inducement claim because plaintiff did “not allege facts establishing that in August and September 2018, when the parties were negotiating the terms of the purchase agreement, Pragad had no intention of honoring his promises with respect to that agreement.”9 “General allegations of lack of intent to perform are insufficient; rather, facts must be alleged establishing that the adverse party, at the time of making the promissory representation, never intended to honor the promise.”10 “At most,” said the Court, “plaintiff allege facts establishing that around three years later, in the fall of 2021, Pragad stated that he would not return Newsweek to plaintiff.” 11 Finally, the Court held that the motion court “correctly dismissed the causes of action for breach of fiduciary duty and equitable accounting.” 12 To plead both causes of action, a plaintiff must allege a fiduciary relationship. The Court found that plaintiff failed to do so, citing authority that stands for the proposition that a fiduciary relationship does not exist when parties merely negotiate an agreement at arm’s length. 13 Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.  This article is for informational purposes and is not intended to be and should not be taken as legal advice.  References Slip Op. at *1 (citing W.W.W. Assoc., Inc. v. Giancontieri , 77 N.Y.2d 157, 162 (1990)). Id. Danann Realty Corp. v. Harris , 5 N.Y.2d 317, 320-21 (1959); Laduzinski v. Alvarez & Marsal Taxand LLC , 132 A.D.3d 164, 169 (1st Dept. 2015).  The Court noted that “ ismissal of the cause of action for unjust enrichment compel dismissal of the cause of action for constructive trust because ‘the purpose of a constructive trust is prevention of unjust enrichment.’” Slip Op. at *2 (quoting Genger v. Genger , 121 A.D.3d 270, 278 (1st Dept. 2014) (internal quotation marks omitted)). Slip Op. at *2 (citing Wilson v. Dantas , 173 A.D.3d 460, 461 (1st Dept. 2019), lv. denied , 34 N.Y.3d 909 (2020); Fariello v. Checkmate Holdings, LLC , 82 A.D.3d 437, 438 (1st Dept. 2011)). Id. (citing Kramer v. Greene , 142 A.D.3d 438, 441 (1st Dept. 2016)). See MG W. 100 LLC v. St. Michael’s Prot. Episcopal Church , 127 A.D.3d 624, 626 (1st Dept. 2015). Goldman v. Simon Prop. Grp., Inc. , 58 A.D.3d 208, 220 (2d Dept. 2008). Slip Op. at *2 (citing King Penguin Opportunity Fund III, LLC v. Spectrum Grp. Mgt. LLC , 187 A.D.3d 688, 690 (1st Dept. 2020)). Perella Weinberg Partners LLC v. Kramer , 153 A.D.3d 443, 449 (1st Dept. 2017); Cronos Group Ltd. v. XComIP, LLC , 156 A.D.3d 54, 71 (1st Dept. 2017). Slip Op. at *2 (citing Braddock v. Braddock , 60 A.D.3d 84, 89 (1st Dept. 2009), appeal withdrawn , 12 N.Y.3d 780 (2009)). Id . Id. (citing Eden v. St. Luke’s-Roosevelt Hosp. Ctr. , 96 AD3d 614, 615 (1st Dept. 2012)).

By Jonathan H. Freiberger This Blog has previously addressed the question of whether a binding settlement can be reached through a series of emails as opposed to a fully integrated and formal written settlement agreement.  See, e.g., < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .  These important issues bear repeating to avoid being bound to a settlement that one of the parties did not intend to make. Settlement is an efficient and cost-effective way to resolve disputes and is favored by courts.  See, e.g., Forcelli v. Gelco Corp . , 109 A.D.3d 244, 247-48 (2 nd Dep’t 2013).  Section 2104 of the CPLR, which governs “stipulations,” including settlement agreements, provides: An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered.  With respect to stipulations of settlement and notwithstanding the form of the stipulation of settlement, the terms of such stipulation shall be filed by the defendant with the county clerk. “To be enforceable, a settlement agreement must set forth all material terms, and there must be clear mutual accord between the parties.”  Vlastakis v. Mannix Family Market @ Veteran’s Road, LLC , 2023 WL 6854105, *1 (2 nd Dep’t 2023) (citation and internal quotation marks omitted); see also Teixeira v. Woodhaven Center of Care , 173 A.D.3d 1108, 1109 (2 nd Dep’t 2019).  This is because “settlement agreements are subject to the principles of contract law.”  Forcelli , 109 A.D.3d at 248.  “An email that merely confirms a purported settlement is not necessarily sufficient to bring the purported settlement into the scope of CPLR 2104.” Teixeira, 173 A.D.3d at 1109 (citation omitted). Two recent cases from the Appellate Division, Second Department, address these issues.   Teixeira v. Woodhaven Center of Care Teixeira was decided on October 18, 2023, and involved the purported settlement of a personal injury matter.  The defendant in Teixeira moved pursuant to CPLR 2104 to enforce a settlement agreement it alleged was reached by the parties and “memorialized in an email message.”  The motion court determined that “there was no meeting of the minds or the creation of a settlement that is legally enforceable” and denied the motion.  Defendant appealed. In affirming the motion court, the Second Department stated: Here, contrary to the defendant's contention, an email exchange between counsel did not evidence a clear mutual accord. The email dated October 7, 2020, purportedly confirming the settlement agreement, stated that it was memorializing the "tentative resolution" of the case and was sent by counsel for the defendant, which is the party seeking to enforce the agreement. There is no email subscribed by the plaintiff, who is the party to be charged, or by her attorney confirming the agreement ( see Kataldo v Atlantic Chevrolet Cadillac , 161 AD3d 1059, 1060 <2 nd dep’t 1018> nd dep’t 1018>). Alessina v. El Gauchito II, Corp. Alessina was decided on October 4, 2023, by the Appellate Division, Second Department, and involved the settlement of an employment dispute.  The plaintiffs in Alessina were employees of the defendant restaurant.  Plaintiff’s counsel alleged that: the parties agreed to a settlement of an employment dispute during a mediation. Shortly thereafter, the plaintiffs' attorney emailed the defendants' former attorney … asking him "to confirm the terms of the settlement we reached" earlier that day and setting forth the specific terms, which included the defendants' agreement to pay $325,000 to the plaintiffs by May 3, 2021. replied, "Yes, confirmed."   Thereafter, however, defendant’s former attorney advised plaintiff’s counsel that the settlement sum would not be paid by the defendant.   Plaintiff commenced an action “to recover on an instrument for the payment of money only by motion for summary judgment in lieu of complaint pursuant to CPLR 3213.”  [Eds Note: this Blog has addressed CPLR 3213 < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> ,< here =">here"> and < here =">here"> .]  The motion court granted the motion over defendant’s opposition and the instant appeal followed.  In affirming the motion court, the Second Department stated: Here, the material terms of the settlement were set forth in an email by the plaintiffs' counsel, and accepted in a response subscribed by the defendants' former attorney, who had apparent authority to settle the case on their behalf. The exchange of email correspondence between the attorneys for the parties setting forth all the material terms of the settlement and a manifestation of mutual assent was sufficient to constitute an enforceable settlement agreement between the parties. Contrary to the defendants' contention, the agreement was not conditioned on the parties' execution of a formal settlement and release, or any other further occurrences. The plaintiffs established, prima facie, that the defendants failed to make the payment required by the settlement agreement, which was an "instrument for the payment of money only" within the meaning of CPLR 3213. In opposition, the defendants failed to raise a triable issue of fact.  Accordingly, the Supreme Court properly granted the plaintiffs' motion for summary judgment in lieu of complaint.  Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber Affinity fraud is a type of investment fraud. In this form of fraud, the person committing the fraud preys upon members of an identifiable group, such as a religious or ethnic community, the elderly, or a professional group. The promoter of an affinity fraud frequently is – or pretends to be – a member or a good friend of the group. The fraudster often enlists respected members of the community or religious leaders from within the group to disseminate information about the scheme by convincing them that a fraudulent investment is legitimate and in their best interests. Many times, those leaders become unwitting victims of the fraudster’s scam. Affinity fraud exploits the trust and friendship that exist in group of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity fraud. Victims often fail to notify authorities or pursue their legal remedies and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment. Many affinity scams involve Ponzi schemes or pyramid schemes, where new investor money is used to make payments to earlier investors to give the illusion that the investment is successful. New investors are induced to invest in the scheme and existing investors are lulled into believing their investments are profitable. Unfortunately, as is often the case, the promoter of the scheme steals the investor’s money for personal use. Both types of schemes depend on an unending supply of new investors – when the inevitable occurs, and the supply of new money stops, the scheme collapses, and investors lose most or all of their money. On October 16, 2023, the Securities and Exchange Commission (“SEC”) announced ( here ) that it obtained a temporary restraining order, asset freeze, and other emergency relief to stop an ongoing fraud targeting the Indian American community that raised nearly $130 million since April 2021.  According to the SEC, defendants 1 raised more than $89 million from more than 350 investors for investments in purported venture capital funds that the Founders managed through Nanban Ventures and more than $39 million from 10 investors that invested directly in the three other entities controlled by the Founders. The SEC alleged that the Founders overstated the profitability of the investments and paid investors at least $17.8 million in fictitious profits that were actually payments pursuant to their Ponzi scheme. The SEC further alleged that defendants misrepresented Krishnan’s expertise and success using his “GK Strategies” options trading method. According to the SEC, Krishnan claimed in a YouTube video that he achieved returns of “more than a hundred percent,” and Nanban Ventures claimed in its venture capital funds’ private placement memorandums that Krishnan would manage the funds to generate returns that would “consistently overperform the S&P 500 Index.” The SEC maintained that the actual trading returns using GK Strategies were, with limited exceptions, lower than the returns of the S&P 500 index, lower than the percentage returns that Krishnan claimed in YouTube videos, and negative on numerous occasions. Commenting on the complaint, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated: “We allege that the defendants engaged in a large-scale affinity fraud that targeted hundreds of investors, largely from the DFW-area Indian American community. Through allegedly false promises of unrealistic returns and lies about the success of their investing strategies, the defendants raised nearly $130 million from investors. But in classic Ponzi fashion, the complaint alleges, the defendants used investor money to make fake profit distribution payments, while allegedly siphoning off millions in investors’ funds for themselves. We urge all investors to confirm the credentials of supposed investment professionals and to view investments that advertise outsized returns skeptically.” In addition to the foregoing, the SEC alleged that Nanban Ventures and the Founders violated their fiduciary duties as investment advisers by causing the venture capital funds to invest more than $70 million into companies the Founders controlled. According to the SEC’s complaint, the Founders commingled that money with more than $39 million from at least 10 other investors and then used the commingled funds to, among other things, make Ponzi payments and pay themselves at least $6 million. Commenting on the affinity fraud aspect of the allegations, Eric Werner, Director of the SEC’s Fort Worth Regional Office, stated: “As we allege in our complaint, the defendants used the ‘Nanban’ branding, a word that means ‘friend,’ when raising nearly $130 million from investors of mostly Indian descent. However, the defendants have been the furthest thing from ‘friends’ to their investors, raising money and paying false returns on a foundation of lies.” The SEC charged all defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The SEC also charged the Founders and Nanban Ventures with violating the antifraud provisions of Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8 promulgated thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from all defendants. The SEC also seeks an order prohibiting the Founders from acting as officers or directors of a public company. As copy of the SEC’s complaint can be found here . Footnote The SEC named as defendants Nanban Ventures LLC (“Naban Ventures”), its three founders Gopala Krishnan (“Krishnan”), Manivannan Shanmugam, and Sakthivel Palani Gounder (collectively, the “Founders”), and three other entities that the Founders control. Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber Negligent misrepresentation and fraudulent inducement are, to some extent, cut from the same cloth. Both causes of action involve false statements. Often, though not always, the failure to satisfy the elements of one of the claims will result in the failure to satisfy the elements of the other.  In Borovina v. ACAP Fund GP, LLC , 2023 N.Y. Slip Op. 05115 (2d Dept. Oct. 11, 2023) (here), the Appellate Division, Second Department affirmed the dismissal of a fraud claim on the ground that it mirrored the plaintiff’s negligent misrepresentation claim and was otherwise conclusory and violative of CPLR 3016(b). “A claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information.” 1 “‘ iability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.’” 2 Notably, the relationship “requires a closer degree of trust than an ordinary business relationship.” 3 For this reason, arm’s-length transactions between sophisticated parties do not give rise to privity. 4 A claim for fraudulent inducement requires the plaintiff to demonstrate that the defendant made a misrepresentation or omission of a material existing fact, which was false and known to be false by the defendant when made, for the purpose of inducing the plaintiff’s reliance thereon; that the plaintiff justifiably relied on such misrepresentation or omission; and that the plaintiff was injured thereby. 5 Borovina v. ACAP Fund GP, LLC According to the complaint, in January 2021, plaintiff registered with defendant The Loan Source, Inc. (“TLS”), and received access to the TLS online portal for the purposes of obtaining services to submit an application for a loan through the Payroll Protection Program (“PPP”). Plaintiff alleged that TLS and defendant ACAP Fund GP, LLC (“ACAP”), conducted business together as “ACAP + The Loan Source Team.” After plaintiff uploaded all documentation to the TLS online portal, TLS sent plaintiff a notice that there was an error or mismatch in the reporting of plaintiff’s social security and tax identification numbers with documentation previously submitted by plaintiff in support of a prior PPP loan application. In response, plaintiff provided TLS documentation to fix the error. TLS informed plaintiff that it had received the additional documentation and that his PPP loan application “should be all set.”  Thereafter, plaintiff continued to receive error notices regarding his social security and tax identification numbers. TLS advised him to disregard those notices as they were “out of date.”  Subsequently, in April 2021, TLS informed plaintiff that it was unable to obtain approval of his PPP loan application and that it could no longer provide PPP-related services to him. Plaintiff commenced the action to recover damages for negligent misrepresentation and fraud against ACAP, TLS, and defendant Sterling National Bank. ACAP and TLS moved to dismiss the complaint, pursuant to CPLR 3211(a)(7), insofar as asserted against them.  In an order dated October 19, 2021, the motion court, inter alia , granted the motion, finding that plaintiff failed to plead negligent misrepresentation and fraud with particularity. Plaintiff appealed. As noted, the Second Department affirmed the dismissal of the complaint. The Court held that plaintiff did not demonstrate the existence of a special relationship with TLS and ACAP. Noting that a special relationship does not arise from an arm’s-length business transaction, the Court found that plaintiff failed to allege facts sufficient to “support an inference that a special relationship was created or existed between the plaintiff and ACAP or TLS.” 6 “Further,” held the Court, “the Supreme Court properly granted that branch of the motion of ACAP and TLS … to dismiss the cause of action sounding in fraud insofar as asserted against them.” 7 The Court found that the fraud allegations “were merely a recitation of the negligent misrepresentation cause of action.” 8 In addition, said the Court, plaintiff failed to plead the claim with particularity, alleging in a “conclusory” way “that the defendants’ representations ‘were so reckless and wanton as to constitute fraud.’” 9 Footnotes J.A.O. Acquisition Corp. v. Stavitsky , 8 N.Y.3d 144, 148 (2007); see also Mandarin Trading Ltd. v. Wildenstein , 16 N.Y.3d 173, 180 (2011). Fresh Direct, LLC v. Blue Martini Software, Inc. , 7 A.D.3d 487, 489 (2d Dept. 2004) (quoting Kimmell v. Schaefer , 89 N.Y.2d 257, 263 (1996). Fleet Bank v. Pine Knoll Corp. , 290 A.D.2d 792, 795 (3d Dept. 2002) (internal quotation marks and citation omitted). See Greenberg, Trager & Herbst v. HSBC Bank USA , 17 N.Y.3d 565, 579 (2011). Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996); see also New York Univ. v. Continental Ins. Co. , 87 N.Y.2d 308, 318 (1995). Slip Op. at *2 (citations omitted). Id. Id. Id. (citations omitted). Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jonathan H. Freiberger As previously noted in this Blog, there are two “components and constitutional predicates of personal jurisdiction.”  Keane v. Kamin , 94 N.Y.2d 263, 265 (1999). “One component involves service of process, which implicates due process requirements of notice and opportunity to be heard.”  Id. (citations omitted). Even though a defendant may be subject to the jurisdiction of the Court, dismissal may be sought “based on the claim that service was not properly effectuated.”  Id. (citations omitted).  “The other component of personal jurisdiction involves the power, or reach, of a court over a party, so as to enforce judicial decrees.”  Id. (citations omitted).  This requires a “constitutionally adequate connection between the defendant, the State and the action” ( Id. (citations omitted)) and is beyond the scope of this article.  [Personal jurisdiction and service of process have been discussed, inter alia , < here =">here"> , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .] The CPLR provides numerous methods for the service of process on, inter alia , individuals, business entities and governmental entities.  See CPLR §§ 307 to 318.  CPLR 308 addresses service of process on individuals.  The failure to serve process in “strict compliance” with the “statutory methods,” “leaves the court without personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void.”  Nationstar Mortgage, LLC v. Gayle , 191 A.D.3d 1002 (2 nd Dep’t 2021) (citations omitted).  Accordingly, proper service of process, and proof thereof, is of the utmost importance.  In order to serve process on an individual, for example, process servers and attorneys need to know, inter alia , the defendant’s “dwelling place or usual place of abode” to serve by substituted service under CPLR 308(2) or (4).  Accordingly, public records such as DMV records are frequently used to locate potential defendants.  Vehicle and Traffic Law § 505(5) requires licensees to notify the DMV of changes of address within ten days of such change.  Similarly, Vehicle and Traffic Law 401(3) requires the same thing for vehicle registrations.  What happens, however, if a licensee or registrant fails to update an address with the DMV, and a process server relies on the erroneous information to serve process?  The law in this regard was inconsistent within and amongst the Appellate Division Departments.  The Second Department, however, recently clarified the law (in the Second Department at least). On September 13, 2023, the Appellate Division, Second Department, addressed this important issue in Castillo-Florez v. Charlecius .   The plaintiff in Castillo-Florez was hit by a bus owned by the MTA and operated by the individual defendant.  Plaintiff commenced a personal injury lawsuit.  The individual defendant was served with process upon a person of suitable age and discretion at an address indicated in the individual defendant’s DMV records.  When the individual defendant failed to appear, the plaintiff moved for a default judgment.  In support of the motion, the plaintiff submitted the process server’s affidavit which contained copies of the relevant DMV records showing the outdated address.  The individual defendant opposed the motion and argued that he did not default because he was never served with process and that the presumption of service arising from the process server’s affidavit was rebutted by the individual defendant’s “affidavit, in which he denied receipt of service and denied residing at the at the time service allegedly was made.”   The motion court granted the plaintiff’s motion holding that “while may not have resided at the as of June 2019, service upon him at that address was nevertheless permissible because had failed to update his mailing address with the DMV as required by VTL § 505(5). Additionally, the court determined that 's failure to update his address with the DMV precluded a challenge to the diligence of the process server in ascertaining 's correct address.”  The individual defendant appealed, and the Second Department reversed. As stated by the Castillo-Florez Court, the “principal question presented on this appeal is whether an individual defendant's failure to fulfill the statutory obligation to timely notify the New York State Department of Motor Vehicles … of a change of address, standing alone, estops that defendant from contesting service of the summons and complaint made at his or her former address.”  In answering the question in the negative, the Court held that “while there are circumstances where a defendant may be estopped from contesting service of process based in part on the failure to update his or her address with the DMV, such as where the defendant engages in a deliberate attempt to avoid service, the mere failure to update one's address with the DMV, standing alone, does not automatically warrant application of the estoppel doctrine.” In reaching its decision, the Castillo-Florez Court surveyed the varied case law on this issue.  The Court noted that estoppel may be employed to “preclude a defendant 'from challenging the location and propriety of service of process if that defendant has engaged in affirmative conduct which misleads a party into serving process at an incorrect address’” (c iting Hudson Val. Bank, N.A. v. Eagle Trading , 208 A.D.3d 648, 650 (2 nd Dep’t 2022), quoting Everbank v. Kelly , 203 A.D.3d 138, 145 (2 nd Dep’t 2022)).  [Eds. Note: this Blog discussed Everbank < here =">here"> .]   As an integral part of its analysis, the Court discussed Feinstein v. Bergner , 48 N.Y.2d 234 (1979), a motor vehicle accident case.  There the defendant provided an address at the scene of an accident and was served with process at that location 30 months later.  The defendant, however, moved 10 months after the accident.  The Court of Appeals failed to sustain service and declined to apply estoppel because the plaintiff “failed to demonstrate that engaged in conduct which was calculated to prevent them from learning of his new address.” (Internal quotation marks omitted, brackets in original.)   The Second Department then noted that it has applied estoppel inconsistently over the years.  It has done so in motor vehicle accident cases solely because the defendant failed to timely notify the DMV of an address change.  In other cases, the Court noted, a defendant’s address was not updated with the DMV and “the defendant had also engaged in affirmative conduct that court viewed as a deliberate attempt to avoid notice of the action, making estoppel appropriate.”  The Court also noted that it “has, at times, declined to apply estoppel where there was no evidence that the defendants had engaged in any conduct which could be viewed as a deliberate attempt to avoid service.”  The Court also analyzed similar cases from other Departments. The Second Department then recognized that: certain of this Court's jurisprudence in this area drifted from the original intent of Feinstein . Although Feinstein did not focus on Vehicle and Traffic Law § 505(5), nothing in that decision suggests that an individual defendant's failure to timely update his or her address with the DMV, standing alone, mandates precluding a defendant from challenging service made at a former address. Rather, as discussed, the Court of Appeals declined to apply estoppel because the plaintiffs had failed to demonstrate that the defendant engaged in conduct calculated to prevent them from learning of his new address ( see Feinstein v Bergner , 48 NY2d at 241). We find that the failure to update one's address, by itself, should not equate with affirmative or deliberate conduct designed to avoid service, even when coupled with a defendant's direct involvement in an accident.   The Second Department then held “that the mere failure to update one's address with the DMV, standing alone, does not automatically equate with a deliberate attempt to avoid service and warrant estopping a defendant from challenging the propriety of service at a former address o the extent our prior decisions, including those previously cited herein, conflict with this principle, they should no longer be followed for that proposition .”  (Emphasis supplied.) As to the specific facts of Castillo-Florez, the Court found that the individual defendant did nothing to prevent the plaintiff “from learning his new address”.  Nor was there any basis to conclude that the individual defendant “neglected to update his address with the DMV as part of a deliberate attempt to avoid service”.  Finally, while the process server’s affidavit of service was prima facie evidence of proper service, the individual defendant “sufficiently rebutted the presumption of proper service n opposition to the plaintiff's motion, a detailed, sworn affidavit from was submitted, in which he, inter alia , denied receipt of service, denied residing at the at the time service allegedly was made, and set forth the location of his address at the time of service”.  Thus, the Court determined that under the circumstances, “a hearing to determine whether was properly served pursuant to CPLR 308(2) was required.” Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber “A” brings an action against “B”. The causes of action asserted against “B” are all timely for statute of limitations purposes.  Following discovery, “A” learns that “C” played a material role in the facts and circumstances leading up to the claims asserted in the complaint. “A” wants to amend the complaint to include claims against “C”, who would be a new defendant. The claims that “A” plans to assert against “C” are, however, time barred. Can “A” bring the untimely claims against “C”? Yes, if they relate back to the claims asserted in the original complaint against “B”.  The foregoing is the basic fact pattern in Goldberg v. Torim , 2023 N.Y. Slip Op. 05097 (1st Dept. Oct. 10, 2023) ( here ). What is The Relation-Back Doctrine? Under the relation-back doctrine, new parties may be joined as defendants in a previously commenced action, after the statute of limitations has expired on the claims against them. 1 The doctrine is codified in of CPLR 203. The doctrine is “ imed at liberalizing the strict, formalistic pleading requirements of the century, while at the same time respecting the important policies inherent in statutory repose.” 2 It “enables a plaintiff to correct a pleading error – by adding either a new claim or a new party – after the statutory limitations period has expired.” 3 It is within court’s “sound judicial discretion to identify cases that justify relaxation of limitations strictures … to facilitate decisions on the merits if the correction will not cause undue prejudice to the plaintiff’s adversary.” 4 The Court of Appeals has recognized that a more relaxed standard applies where a plaintiff seeks to use the relation-back doctrine by adding a new claim against a defendant who is already a party to litigation as opposed to adding a new defendant. 5 Where a plaintiff proposes to add a new defendant, the Court of Appeals has adopted a three-part test for determining whether to apply relation back to an amended pleading that adds a new defendant. 6 No such test applies where a plaintiff seeks the relation back of a new claim. 7 In other words, where a proposed amended complaint contains an untimely claim against a defendant who is already a party to the litigation, the relevant considerations are simply (1) whether the original complaint gave the defendant notice of the transactions or occurrences at issue, and (2) whether there would be undue prejudice to the defendant if the amendment and relation back are permitted. 8 Under the three-part test applicable to the addition of a new defendant, the plaintiff must show that (1) the claims against the new defendant arises from the same conduct, transaction, or occurrence as the claims against the original defendant, (2) the new defendant is “united in interest” with the original defendant, and will not suffer prejudice due to the lack of notice, and (3) the new defendant knew or should have known that, but for the plaintiff’s mistake, he/she would have been included as a defendant. 9 The requirement of unity of interest is “more than a notice provision”. 10 “The test is whether ‘the interest of the parties in the subject-matter is such that they stand or fall together and that judgment against one will similarly affect the other.’” 11 Unity of interest will not be found unless there is some relationship between the parties giving rise to the vicarious liability of one for the conduct of the other. 12  Also, unity of interest will not be found if there is a possibility that the new defendant may have a defense unavailable to the original defendant. 13 Notably, a marital relationship is not, by itself, sufficient to find a unity in interest. Only “when the spouse is acting as agent while committing the tort, or when the married person consents to, instigates, participates in, or coerces the spouse’s action” will there be a finding of unity in interest. 14 Goldberg v. Torim Goldberg arose from a real estate transaction between close friends that went awry. In February 2017, defendant Shloime Torim (“Shloime”) allegedly called plaintiff and told him that he found a property selling for $500,000 that plaintiff should buy and later sell for a profit. According to plaintiff, defendant insisted that the property could be flipped within one year for a ten percent profit.  In early August 2017, defendant called plaintiff to tell him that the property had sold for $700,000. Plaintiff alleged that defendant paid him only $525,000.00 from the sale, instead of the $700,000 that defendant represented the property had sold for. Plaintiff demanded the remaining $175,000. Defendant did not pay the amount demanded.  Plaintiff brought suit against defendant, asserting causes of action for breach of fiduciary duty, conversion and fraud. Defendant moved to dismiss the complaint. By order dated January 3, 2019, the motion court dismissed the causes of action for breach of fiduciary duty and fraud but sustained the cause of action for conversion. Plaintiff appealed. The Appellate Division, First Department affirmed, finding the breach of fiduciary claim conclusory and the fraud claim unsupported by the facts alleged. 15 Thereafter, plaintiff moved to amend the complaint to, among other things, bring defendant’s wife, Leah Torim (“Leah”), and son, Sholom Torim (“Sholom”) into the action. Plaintiff claimed that Leah was involved in the transactions that facilitated the sale of the disputed property, including executing certain documents, and created the purported profits that plaintiff claims were converted. The motion court held that those allegations were sufficient, for pleading purposes, to grant the motion to amend. Leah moved to dismiss the conversion cause of action asserted against her on the ground that the statute of limitations had expired. Leah argued that, among other things, the did not relate back to the claim against Shloime and, therefore, it was time barred. With regard to the relation back doctrine , Leah maintained that her marriage to Shloime by itself was insufficient to find a unity in interest for purposes of the doctrine. Plaintiff opposed the motion, arguing that the statute of limitations had not run. Plaintiff maintained that since the claim was based upon fraud, the statute of limitations was governed by the six-year limitation period applicable to fraud claims. 16 Plaintiff also argued that the claim against Leah related back to the timely conversion claim asserted against Shloime and, therefore, the three-year statute of limitations had not run. Plaintiff maintained that there was unity in interest because Leah acted as Shloime’s agent while the tort was being committed and consented to and participated in Shloime’s fraudulent conduct. The motion court denied the motion. The motion court found that the six-year limitation period applied even though the fraud claim had been dismissed.  On appeal, the First Department affirmed on the basis of the relation-back doctrine. In so holding, the Court explained that although Leah and Shloime “were not ‘united in interest’ solely because they are husband and wife,” they were nevertheless united in interest due to “an agency relationship between” them. 17 Such a relationship, said the Court, was “sufficient to impose vicarious liability on defendant for codefendant’s acts, including but not limited to Leah having allegedly forged plaintiff’s signature on a deed as Shloime’s agent and transferring and selling the property in furtherance of the underlying conversion.” 18 Footnotes Higgins v. City of New York , 144 A.D.3d 511, 513 (1st Dept. 2016). Buran v. Coupal , 87 N.Y.2d 173, 177 (1995). Id. Id. at 178 (internal quotation marks and citation omitted). Id. ; see also Duffy v. Horton Mem. Hosp. , 66 N.Y.2d 473, 477 (1985). Id. Id. Id. ; CPLR 203(f); CPLR  3025(b); see also Caffaro v. Trayna , 35 N.Y.2d 245, 251 (1974). Id. ; see also Higgins , 144 A.D.3d at 513; Garcia v. New York-Presbyt. Hosp. , 114 A.D.3d 615 (1st Dept. 2014). Higgins , 144 A.D.3d at 513 (quoting Mongardi v. BJ’s Wholesale Club, Inc. , 45 A.D.3d 1149, 1151 (3d Dept. 2007) (internal quotation marks omitted)). Id. (quoting Vanderburg v. Brodman , 231 A.D.2d 146, 147-148 (1st Dept. 1997) (internal quotation marks omitted)). Id. (citations omitted). Id. (citations omitted). See L&L Plumbing & Heating v. DePalo , 253 A.D.2d 517, 518 (2d Dept. 1998) (vicarious liability related back where husband and wife owned property together and husband acted as agent for wife). Goldberg v. Torim , 181 A.D.3d 443 (1st Dept. 2020). A cause of action for conversion is subject to a three-year limitation period. CPLR 214(3); Sporn v. MCA Records , 58 N.Y.2d 482,488-489 (1983). However, where the conversion claim is “based upon fraud” the cause of action is governed by the six-year limitations period for fraud. See , e.g. , Monteleone v. Monteleone , 162 A.D.3d 761 (2d Dept. 2022). Slip Op. at *1. Id. (citations omitted). Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber In Gold v. Rothfeld , 2023 N.Y. Slip Op. 05006 (2d Dept. Oct. 4, 2023) ( here ), the Appellate Division, Second Department affirmed the dismissal of a fraud complaint on two grounds: collateral estoppel and failure to plead fraud with particularity. We examine the decision and the principles underpinning the holding below. The Requirement To Plead Fraud With Particularity To state a claim for fraud, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” The claim must be pleaded with particularity. Conclusory allegations will not suffice. Neither will allegations based on information and belief. If “sufficient factual allegations of even a single element are lacking,” then the claim must be dismissed. The requirement that a fraud claim be pleaded with particularity can be found in Section 3016(b) of the Civil Practice Law and Rules (“CPLR”). Under CPLR § 3016 (b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.”   To satisfy the particularity requirement, the plaintiff must allege such facts as the time, place, and content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result. Put another way, the complaint must identify the “who, what, where, when and how” of the alleged fraud. Notwithstanding, in Pludeman v.Northern Leasing Systems, Inc. , the Court of Appeals held that CPLR § 3016(b) “should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.” Therefore, at the pleading stage, a complaint need only “allege the basic facts to establish the elements of the cause of action.” Thus, as noted, a plaintiff will satisfy CPLR 3016(b) when the facts permit a “reasonable inference” of the alleged misconduct. Collateral Estoppel The doctrine of collateral estoppel prevents a party from relitigating an issue that was “raised, necessarily decided and material in the first action,” provided the party had a full and fair opportunity to litigate the issue. The doctrine applies when: “(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits.” Collateral estoppel “is a doctrine intended to reduce litigation and conserve the resources of the court and litigants and it is based upon the general notion that it is not fair to permit a party to relitigate an issue that has already been decided against it.” The doctrine is an equitable defense “grounded in the facts and realities of a particular litigation, rather than rigid rules.” The proponent of collateral estoppel has the burden of demonstrating “the identicality and decisiveness of the issue,” while the opponent has the burden of establishing “the absence of a full and fair opportunity to litigate the issue in prior action or proceeding.” In New York, the CPLR specifically recognizes collateral estoppel as a basis for dismissal. It is also an affirmative defense under the CPLR. Gold v. Rothfeld In Gold , plaintiff brought an action for damages against defendant, claiming fraud and conspiracy to commit fraud. In particular, plaintiff claimed damages in connection with certain alleged improprieties in, among other things, the preparation of certain estate planning instruments for his mother, Grace K. Gold, and father, Eugene Gold, the administration of their estates, and communications with him regarding the foregoing. Background On November 8, 2011, Grace died, survived by Eugene and their three children (plaintiff, Cheryl Gold and Amy Gold Kaufman). Under Grace’s last will and testament, dated February 4, 2011, Eugene was appointed executor of the estate. Among other things, Grace created a trust in her will that provided income to Eugene during his lifetime, and which was to terminate (and did terminate) upon Eugene’s death. Grace’s will also provided, in pertinent part, that Eugene had a limited power of appointment over the corpus of the trust exercisable in favor of one or more of Grace’s descendants. On November 15, 2011, plaintiff signed a waiver and consent to the probate of Grace’s will. Eugene died on November 8, 2013, leaving a last will and testament and codicils for which Cheryl was the nominated executor. With respect to the trust, Eugene’s will provided, among other things, that $2 million was to be distributed to Cheryl and Amy each, with the balance to be distributed to Eugene’s descendants per stirpes. Eugene’s will also contained an in terrorem clause. After Cheryl sought to probate Eugene’s will, plaintiff sought to rescind his previously filed waiver and consent with respect to Grace’s will and moved to stay the probate of Eugene’s will, based on his assertion, inter alia , that Grace lacked capacity at the time she executed her will and that her will was the product of undue influence. In a decision dated July 31, 2014, the Surrogate’s Court determined, in pertinent part, that plaintiff failed to show that Grace lacked capacity at the time she executed her will or that she was subject to undue influence. Thereafter, plaintiff petitioned the Surrogate’s Court for, inter alia , letters of limited administration with respect to Grace’s estate, based upon his assertions that Grace lacked capacity and was subject to undue influence at the time she executed the subject trust and a settlement agreement with the Internal Revenue Service. Cheryl and Amy moved, inter alia , for summary judgment dismissing the amended petition. The Surrogate’s Court granted the the branch of the motion to dismiss the amended petition and denied plaintiff’s demand for an order compelling an accounting without prejudice to renewal at a later date. On November 10, 2017, plaintiff commenced the action in Supreme Court. Defendant moved to dismiss the complaint with prejudice. That motion was withdrawn after plaintiff filed an amended complaint. In the amended, plaintiff alleged, in sum and substance, that defendant made material representations that were false regarding Eugene’s intention to exercise certain powers of appointment under Grace’s will, and the impact that would occur to plaintiff’s rights by executing the waiver and consent for probate; false and misleading testimony offered by defendant during his examination in the probate proceeding of Eugene’s will; knowing and willful participation in false and misleading statements and submissions made by co-counsel to the Surrogate’s Court in order to induce the court to amend the probate decree; knowingly false material representations to deceive plaintiff; reliance by plaintiff to his detriment on defendant’s advice regarding the non-exercise of certain powers of appointment, the impact of executing the waiver and consent prepared by the defendant; reliance on defendant’s representations as an officer of the court, who was required to refrain from engaging with plaintiff and, instead, advise him to retain independent counsel; the prohibition on ex parte communications with the Surrogate’s Court and the prohibition on obtaining substantive relief without providing the plaintiff with notice and an opportunity to be heard; damages plaintiff sustained because of the waiver of plaintiff’s right to conduct examinations in the estate of Grace; and by increased and unnecessary legal fees related to the foregoing. Defendant filed a new motion to dismiss pursuant to CPLR § 3211(a)(1), CPLR § 3211(a)(5) and CPLR § 3211(a)(7). Among other things, defendant argued that the allegations in the amended complaint concerned acts that were previously decided by the Surrogate’s Court and therefore barred by the doctrine of collateral estoppel and the cause of action for fraud was not sufficiently pleaded with specificity. The Motion Court’s Decision and Order The motion court held that the action was barred by the doctrine of collateral estoppel “because this action essentially no different from the plaintiff’s prior attempts to vacate his waiver and consent in the Surrogate’s Court.” “Distilled to its essence,” said the motion court, “the complaint amounts to nothing more than a rehashing of the same theory of fraudulent misrepresentations and conspiracy which was explicitly considered and rejected by the Surrogate’s Court as well as the Second Department.” The motion court held that “plaintiff failed to show that he did not have a full and fair opportunity at the Surrogate Court proceedings or subsequently at the Appellate Division to litigate the matters alleged herein.” Accordingly, the motion court concluded that the fraud claim was barred on collateral estoppel grounds. The motion court also held that plaintiff failed to state a fraud cause of action. The motion court explained that plaintiff failed to plead any of the elements of the claim, stating “plaintiff has not identified any specific instances of misconduct or any misrepresentation by the defendant.…” The motion court also explained that plaintiff “failed to properly plead the elements of misrepresentation of a material fact and justifiable reliance with specificity.” Moreover, said the motion court, “plaintiff has not, and cannot plead identifiable, actionable damages.” Plaintiff appealed. As noted, the Second Department affirmed. The Second Department’s Decision As to the dismissal on collateral estoppel grounds, the Court held that the motion court “properly concluded that so much of the fraud cause of action as was predicated upon allegations that the defendant made misrepresentations to induce the plaintiff to sign a waiver and consent to the probate of Grace’s will and concerning Grace’s personal property was barred by the doctrine of collateral estoppel.” The Court explained that “ hose allegations were raised by the plaintiff in a petition he filed in the Surrogate’s Court, seeking to rescind the waiver and consent, and, after a full and fair opportunity to litigate, were necessarily decided against him in a 2014 order of that court granting dismissal of the petition.” Regarding the dismissal of the fraud claim for failing to state a claim, the Court held that the motion court properly granted the motion. The Court explained that the “amended complaint … failed to sufficiently allege recoverable, nonspeculative damages with respect to the allegations that the defendant made certain misrepresentations regarding the plaintiff’s inheritance in November 2011.” The Court also explained that plaintiff “failed to sufficiently set forth the alleged misrepresentations made, and justifiable reliance thereon, concerning the defendant’s purported participation in a fraudulent scheme in September 2016. Takeaway In a prior article, we quoted Stephen King as saying “the truth is in the details. No matter how you see the world …, the truth is in the details.” ( Here .) We said that the “quote fairly sums up the pleading requirement that all plaintiffs must satisfy when alleging a fraud.” The reason: courts require plaintiffs to provide sufficient details of the alleged misconduct to support a reasonable inference that the allegations of fraud are true. For this reason, conclusory allegations will not suffice. Plaintiffs must describe the “who, what, when, where, and how” of the fraud, or “the first paragraph of any newspaper story.”   In the absence of such detail, as in  Gold , even under the reasonable inference standard of the CPLR, plaintiff could not maintain a fraud claim. As discussed above, the collateral estoppel doctrine will preclude a party from relitigating an issue that has been previously decided against him/her in a prior proceeding where he/she had a full and fair opportunity to litigate such issue. In Gold , both the motion court and the Second Department found that plaintiff’s amended complaint was simply a reiteration of the same theory that was litigated, considered, and rejected by the Surrogate’s Court and the Second Department. Since plaintiff had a full and fair opportunity to be heard in those proceedings, the courts dismissed the action on collateral estoppel grounds. ________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 421 (1996). Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559 (2009). Id. See Facebook, Inc. v. DLA Piper LLP (US) , 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”). RKA Film Fin., LLC v. Kavanaugh , 2018 WL 3973391, at *3 (Sup. Ct., N.Y. County 2018) (quoting Shea v. Hambros PLC , 244 A.D.2d 39, 46 (1st Dept. 1998)). See also Gregor v. Rossi , 120 A.D.3d 447 (1st Dept. 2014). Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). Id. at 491 (internal quotation marks and citation omitted). Id. at 492. Id. E.g. , Parker v. Blauvelt Volunteer Fire Co. , 93 N.Y.2d 343, 349 (1999). Conason v. Megan Holding, LLC , 25 N.Y.3d 1, 17 (2015) (internal quotation marks omitted). Kaufman v. Eli Lilly & Co. , 65 N.Y.2d 449, 455 (1985) Buechel v. Bain , 97 N.Y.2d 295, 303 (2001). Ryan v. New York Tel. Co. , 62 N.Y.2d 494, 501 (1984). See CPLR § 3211(a)(5). See CPLR § 3018(b). An in terrorem clause is a provision in a will that prohibits a beneficiary from disputing any provisions of a will. People use such clauses to discourage challenges to a will and avoid long probate proceedings. Under an in terrorem clause, a beneficiary’s interest or inheritance under the will is revoked if the beneficiary violates the clause. Most states enforce in terrorem clauses, though they are disfavored and subject to strict construction, such that they do not grant or hold absolute authority over the distribution of the testator’s interests. Many states limit the enforceability of in terrorem clauses to ensure beneficiaries can challenge fraudulent conduct or other conduct against public policy. In New York, for example, courts have held that in terrorem clauses that attempt to preclude a beneficiary from questioning the eligibility or conduct of a fiduciary are not enforceable as against public policy and the intentions of the testator. For a more in-depth discussion of in terrorem clauses, see here (from where the foregoing discussion is taken). Citations omitted. See Matter of Gold , 170 A.D.3d 1174 (2d Dept. 2014). Citation omitted. Citations omitted. Slip Op. at *1. Id. (citations omitted). Id. Id. Id. (citations omitted). United States ex rel. Lubsy v. Rolls-Royce Corp. , 570 F.3d 849, 853 (7th Cir. 2009) (internal quotation marks omitted).

By Jonathan H. Freiberger This Blog frequently addresses complex substantive and procedural issues.  Today, however, we return to basics.  In New York, an “action is commenced by the filing of a summons and complaint or a summons with notice in accordance with rule twenty-one hundred two ” of the CPLR.  CPLR 304(a) .  “Filing” means “the delivery of the summons with notice summons and complaint … to the clerk of the court in the county in which the action … is brought ….”  CPLR 304(c).  The filing of a summons is necessary to invoke the jurisdiction of the court.  Wesco Ins. Co. v. Vinson , 137 A.D.3d 1114, 1115 (2 nd Dep’t 2016); Ghiazza v. Anchorage Mirina, Inc. , 210 A.D.3d 1328, 1329 (3 rd Dep’t 2022).  “The failure to file the papers required to commence an action constitutes a nonwaivable, jurisdictional defect, and such a defect is not subject to correction under CPLR 2001.”  Ghiazza , 210 A.D.3d at 1329 (citations and internal quotation marks omitted). The CPLR also provides that a court can dismiss an action, without prejudice, if, inter alia , a summons and complaint are not served on the defendant within 120 days “of the commencement of the action.”  CPLR 306-b .  Similarly, a notice of pendency is “effective only if, within thirty days after filing, a summons is served upon the defendant or first publication of the summons against the defendant is made pursuant to an order and publication is subsequently completed.”  CPLR 6512 .  Also, a notice of pendency is subject to “mandatory cancellation” if “service of a summons has not been completed within the time limited by section 6512….”  CPLR 6514 . The failure of the plaintiff to file a summons was an issue decided on October 4, 2023, by the Appellate Division, Second Department, in Park Premium Enterprises v. Norben Lofts, LLC .   The plaintiff in Park was a general contractor hired by the defendant to convert a commercial building into residential apartments.  The plaintiff alleged that it performed under the parties’ contract but was never paid.  The plaintiff filed a mechanic’s lien against the property and, subsequently, filed a complaint and a notice of pendency.  [This blog has discussed mechanic’s liens < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> and notices of pendency < here =">here"> and < here =">here"> .] The defendant moved to, inter alia , dismiss the complaint pursuant to CPLR 3211(a) due to the plaintiff’s failure to file a summons, and to vacate the notice of pendency for failure to comply with CPLR 6511 and 6512.  The Plaintiff filed a summons seven months after filing its complaint and over one month after the defendant filed its motion to dismiss.  The plaintiff opposed the motion by arguing, inter alia , that the Governor’s COVID related executive orders tolled the time in which the plaintiff had to commence the action.  The motion court granted the defendant’s motion and the plaintiff appealed. The Second Department affirmed, holding that the supreme court was without jurisdiction, and the action was a “nullity,” due to the plaintiff’s failure to file a summons.  The Court rejected plaintiff's COVID related arguments.  Thus, the Court held that: The contention of that the time in which to commence an action was tolled by a series of executive orders issued by Governor Andrew Cuomo is misplaced, as no time period is at issue. Rather, in order to commence an action, was required to file a summons and complaint, and the failure to do so warranted dismissal of the complaint.  The Court also rejected the plaintiff’s argument that “the failure to file a summons should have been disregarded pursuant to CPLR 2001 ,” which allows a court, under certain circumstances, to permit the correction of “a mistake, omission, defect or irregularity including … mistake in the filing process.”  In so doing, the Court stated: The contention of that the failure to file a summons should have been disregarded pursuant to CPLR 2001 is improperly raised for the first time on appeal, and, in any event, without merit, as the complete failure to file the initial papers necessary to institute an action is not the type of error that falls within the court's discretion to correct under CPLR 2001. The contention of that it filed a summons after submitting its opposition to the subject motion is based upon matter outside of the record on appeal and is not properly before this Court.  Finally, the Court canceled the notice of pendency due to the dismissal of the action pursuant to CPLR 6514(a). Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber We have often written about the SEC’s whistleblower program and, in particular, the success of the program with respect to detecting and preventing violations of the federal securities laws. The success of the program depends, in large part, on the ability of would-be whistleblowers to have the freedom to report wrongdoing without fear of reprisal. Taking steps to impede an employee or former employee from sharing information with the SEC impairs this free flow of information to the Commission. To ensure the freedom to communicate, the SEC has cracked down on companies that use severance agreements and other types of employment contracts to silence and discourage employees from reporting wrongdoing to the Commission. 1 In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to combat illegal and fraudulent conduct on Wall Street and promote compliance with the federal securities and commodities laws.  The Dodd-Frank Act contains whistleblower provisions that authorize the Commission to pay substantial cash rewards to whistleblowers that voluntarily provide the SEC with information about securities fraud and other violations of the securities laws, including the Foreign Corrupt Practices Act.  To fulfill the purpose of the Dodd-Frank Act, the Commission adopted Rule 21F-17, 2  which provides in relevant part: (a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications. Rule 21F-17 applies to any policy or procedure, or agreement, such as confidentiality, severance, and non-disclosure agreements, that may impede an employee or former employee from providing information to the SEC about a securities law violation.  Despite being effective for more than 12 years, many companies have ignored the mandate of Rule 21F-17. In this regard, they have used severance agreements and other types of employment contracts to silence and discourage employees from reporting violations of the securities laws to the Commission. That was the case in the Matter of D. E. Shaw & Co, L.P. , Securities Exchange Act of 1934, Release No. 98641 (Sept. 29, 2023). Matter of D. E. Shaw & Co, L.P. On September 29, 2023, the SEC announced ( here ) that it settled charges against New York-based registered investment adviser D. E. Shaw & Co., L.P. (“DESCO”) for impeding whistleblowing by requiring employees to sign agreements prohibiting the disclosure of confidential corporate information to third parties, without an exception for potential SEC whistleblowers, and by requiring departing employees to sign releases affirming that they had not filed any complaints with any government agency in order for the employees to receive deferred compensation. DESCO agreed to pay $10 million to settle the SEC’s charges . The SEC found ( here ) that, from at least 2011 through 2019, DESCO required new employees to sign agreements that prohibited them from disclosing confidential information to anyone outside the company unless authorized by DESCO or required by law or court order. Confidential information was broadly defined to include any information gained in the course of employment that could reasonably be expected to be damaging to DESCO if disclosed to third parties. In addition, according to the SEC, from at least 2011 through 2023, DESCO required approximately 400 of its departing employees to sign releases affirming that they had not filed any complaints with any governmental agency, department, or official in order for them to receive deferred compensation and other benefits sometimes worth millions of dollars. According to the SEC, in 2017, DESCO circulated a firm-wide email notifying employees that they were not prohibited from communicating with regulators regarding possible violations of law and that notice to DESCO was not required. However, said the SEC, DESCO did not include similar whistleblower protection language in its employment agreements until 2019 and in its releases until 2023—after the SEC’s investigation commenced. “Entities employing confidentiality, separation, employment and other related agreements should take careful notice of today’s enforcement action,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “The Commission takes seriously the enforcement of whistleblower protections and those drafting or using these types of agreements should take equally serious their obligations to ensure that they don’t impede whistleblowers from contacting the Commission.” “Protected by federal law, whistleblowers play a significant role in uncovering fraud and other illegality in the securities markets, particularly with respect to registered entities regulated by the Commission,” said Sheldon L. Pollock, Associate Director of the SEC’s New York Regional Office. “The SEC remains committed to ensuring their unfettered ability to provide information to further our investigations.” In its cease-and-desist order ( here ), the SEC found that DESCO violated Rule 21F-17(a) of the Securities Exchange Act of 1934. Without admitting or denying the SEC’s findings, DESCO agreed to be censured, cease and desist from violating the whistleblower protection rule, and pay a $10 million civil penalty. Footnotes In April 2015, the SEC brought the first enforcement action for a violation of the whistleblower protection rule based on a company’s use of a restrictive confidentiality agreement. See In the Matter of KBR, Inc. , Exchange Act Release No. 74619 (Apr. 1, 2015). This Blog wrote about that enforcement action here . Since 2015, the SEC has instituted nearly 20 additional enforcement actions charging violations of the rule. This Blog has examined some of those enforcement actions here , here ,  here ,  here , and  here . Rule 21F-17 became effective on August 12, 2011. Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber In New York, foreign entities – that is, corporations, limited liability companies and partnerships authorized to do business in another jurisdiction or country – are required to register to business with the Secretary of State. 1 The failure to receive such authority deprives the foreign entity of the ability to affirmatively access the courts of New York and subjects any action commenced by the foreign entity to dismissal. 2 The purpose of the registration requirement is to regulate foreign companies that are conducting business within New York State so that they are not doing business under more advantageous terms than “those allowed a corporation of this State.” 3 When applying BCL § 1312(a), the subject of today’s article, the relevant inquiry is whether the foreign entity is “doing business” in the State. The test of doing business in New York for the purpose of BCL § 1312(a) “is not the same as that for jurisdictional purposes.” 4 “Both raise constitutional questions, but the latter involves the due process clause while the former involves the interstate commerce clause.” 5 In construing statutes that license foreign corporations to do business within New York State, the courts try to avoid any interference by the State with interstate commerce. 6 Whether a company is “doing business” in New York “depends upon the particular facts of each case with inquiry into the type of business activities being conducted.” 7 Moreover, “whether was doing business in New York” is determined by looking “at the time the action was commenced.” 8 Notably, “not all business activity engaged in by a foreign corporation constitutes doing business in New York.” 9 A foreign corporation is permitted to transact “some kinds of business within the state without procuring a certificate” authorizing it to conduct business in New York. 10 In order for a foreign corporation to be doing business in New York within the context of BCL § 1312, “the intrastate activity of the foreign corporation be permanent, continuous, and regular.” 11 The entity’s activities cannot be “merely casual or occasional.…” 12 New York courts consider a number of factors, both quantitative and qualitative, when considering the entity’s activity in the State. 13 Among the factors the courts consider are: (a) whether the entity maintains a physical presence or has employees located within the State; 14 (b) the frequency and regularity of activities within the State; 15 and (c) the volume and nature of the activities within the State. 16 Merely entering into a single contract, engaging in an isolated piece of business, or engaging in an occasional undertaking will not suffice to invoke application of BCL § 1312. 17 Similarly, “the solicitation of business and facilitation of the sale and delivery of merchandise incidental to business in interstate and/or international commerce is typically not the type of activity that constitutes doing business in the state within the contemplation of section 1312 (a).” 18 However, regularly and continuously entering the State to solicit, complete and manage sales to customers in New York may constitute doing business in the State. 19 The party seeking dismissal under BCL § 1312(a) must show that the business activities within the State were so systematic and regular as to manifest continuity of activity. 20 Absent sufficient evidence to establish that a plaintiff is doing business in the State, “the presumption is that the plaintiff is doing business in its State of incorporation … and not in New York.” 21 Finally, if the foreign business entity is found to have been continuously and regularly conducting business in the State, the courts often refrain from dismissing the action. 22 Instead, the courts conditionally grant the dismissal motion and provide the plaintiff with a reasonable time period to cure its deficiency under BCL § 1320. 23 In Central Care Solutions, LLC v. Grand Great Neck, LLC , 2023 N.Y. Slip Op. 04749 (2d Dept. Sept. 27, 2023) ( here ), the Appellate Division, Second Department considered the foregoing principles in modifying the dismissal of a complaint with prejudice on BCL § 1312(a) grounds. Central Care Solutions is an action to recover damages for, inter alia , breach of contract. The action was commenced in January 2020 by Clean-Tex Services, Inc. (“Clean-Tex”) and two other plaintiffs.  In March 2020, defendants moved to dismiss the amended complaint insofar as asserted by Clean-Tex on the ground that, inter alia , Clean-Tex lacked the capacity to sue pursuant to BCL § 1312(a), as it was a foreign corporation doing business in New York without registering to do so. Clean-Tex opposed the motion.  On November 2, 2020, the motion court granted the motion with respect to Clean-Tex, directing that Clean-Tex take all necessary actions to obtain authorization to conduct business in New York within six months or else the amended complaint insofar as asserted by Clean-Tex would be dismissed with prejudice upon defendants’ submission of a proposed order of dismissal. Clean-Tex did not obtain authorization to conduct business in New York by the court-ordered deadline of April 29, 2021. However, on April 23, 2021, Clean-Tex submitted an affirmation to the motion court, with notice to defendants, acknowledging that it had not yet obtained the authorization and explaining its efforts so far. In this affirmation, without a notice of motion, Clean-Tex requested a 90-day extension to comply with the motion court’s November 2, 2020 order. On April 30, 2021, one day after the court-ordered deadline, defendants submitted a proposed order and argued that the amended complaint insofar as asserted by Clean-Tex should be dismissed with prejudice. In response, Clean-Tex once again requested an extension to comply with the order and argued that dismissal with prejudice would be a disproportionate and drastic remedy. On May 17, 2021, the motion court entered judgment dismissing the amended complaint insofar as asserted by Clean-Tex with prejudice. On June 8, 2021, 40 days past the court-ordered deadline, Clean-Tex obtained its authorization to conduct business in New York. As noted, on appeal, the Second Department modified the judgment to make the dismissal without prejudice. In a terse opinion, after briefly discussing the purpose of BCL § 1312(a), and noting “the clear preference for disposition of cases on the merits,” 24 the Court held that, “ nder all of the circumstances present here, … the Supreme Court … improvidently exercised its discretion in” dismissing the amended complaint as asserted by Clean-Tex “with prejudice”. 25 Footnotes See , e.g. , BCL § 1312(a). See United Envtl. Techniques, Inc. v. State Dept. of Health , 88 N.Y.2d 824, 825 (1996) (finding that foreign corporation was not registered to do business in New York and therefore lacked capacity to sue). Von Arx, A.G. v. Breitenstein , 52 A.D.2d 1049, 1050 (4th Dept. 1976); see also National Lighting Co. v. Bridge Metal Indus., LLC , 601 F. Supp. 2d 556, 566 (S.D.N.Y. 2009) (additional citation omitted). Great White Whale Adver., Inc. v. First Festival Prods. , 81 A.D.2d 704, 706 (3d Dept. 1981). Id. Id. (citations omitted). Id. Remsen Partners, Ltd. v. Southern Mgmt. Corp. , No. 01 Civ. 4427, 2004 WL 2210254, at *3 (S.D.N.Y. 2004) (citation and internal quotation marks omitted) (alteration in original). Netherlands Shipmortgage Corp. v. Madias , 717 F.2d 731, 735-36 (2d Cir. 1983). Globaltex Group, Ltd. v. Trends Sportswear, Ltd. , No. 09-CV-235, 2009 WL 1270002, at *3 (E.D.N.Y. May 6, 2009) (quoting Int’l Fuel & Iron v. Donner Steel , 242 N.Y. 224, 229 (1926)). Manney v. Intergroove Tontrager Vertriebs GMBH , No. 10 Civ. 4493, 2011 WL 6026507, at *8 (E.D.N.Y. Nov. 30, 2011) (quoting Netherlands Shipmortgage , 717 F.2d at 736) (alteration in original). United Arab Shipping Co. (S.A.G.) v. Al-Hashim , 176 A.D.2d 569, 570 (1st Dept. 1991); see also Maro Leather Co. v Aerolineas Argentinas , 161 Misc. 2d 920, 923 (Sup. Ct., App. Term 1st Dept. 1994) (“where a corporation’s activities within New York are merely incidental to its business in interstate and international commerce, BCL § 1312(a) is not applicable.”); Schwarz Supply Source v. Redi Bag USA, LLC , 64 A.D.3d 696, 696-97 (2d Dept. 2009) (same); Paper Mfrs. Co. v. Ris Paper Co., Inc. , 86 Misc. 2d 95, 98 (Civ. Ct., N.Y. Cty. 1976) (noting that if a “foreign corporation is engaged in local business on more than an isolated or accidental basis, it must comply with the statute” and obtain authorization before bringing suit). Netherlands Shipmortgage , 717 F.2d at 738. Uribe v. Merchants Bank of New York , 266 A.D.2d 21, 21 (1st Dept. 1999) (Plaintiff was not doing business where it maintained no office or telephone listing, owned no real property and had no employees in the State). G.P. Exports v. Tribeca Design , 147 A.D.3d 655, 656 (1st Dept. 2017) (a single business transaction within the State did not warrant the application of BCL § 1312(a)). United Arab Shipping , 176 A.D.2d at 570 (Plaintiff was doing business within the State where its New York office employed approximately 17 full-time employees, actively solicited business, conducted sales activities, negotiated and executed contracts, and generated substantial in-state revenue). Netherlands Shipmortgage , 717 F.2d at 738; Von Arx , 52 A.D.2d at 1049; Airline Exch., Inc. v. Bag , 266 A.D.2d 414, 415 (2d Dept. 1999) (having a bank account, occasionally using an office in the State, and engaging in three transactions in the State, did not support a finding that the business activity was so systematic and regular and essential to its corporate activities as to constitute doing business in New York); 8430985 Canada Inc. v. United Realty Advisors LP , 148 A.D.3d 428 (1st Dept. 2017) (an investment vehicle not subject to the registration requirements of BCL § 1312(a)). Digital Ctr., S.L. v. Apple Indus., Inc. , 94 A.D.3d 571, 572 (1st Dept. 2012) (citation omitted). Highfill, Inc. v. Bruce & Iris, Inc. , 50 A.D.3d 742, 744 (2d Dept. 2008) (corporation was doing business where its regional vice president regularly sent employees to New York to manage “special sales,” and made approximately $6,600,000 in New York sales over several years). JPMorgan Chase Bank, N.A. v. Didato , 185 A.D.3d 801, 802-803 (2d Dept. 2020); Maro Leather , 161 Misc. 2d at 923. Cadle Co. v. Hoffman , 237 A.D.2d 555 (2d Dept. 1997); JPMorgan Chase , 185 A.D.3d at 803; Airline Exch. , 266 A.D.2d at 415. Tri-Term. Corp. v. CITC Indus., Inc. , 78 A.D.2d 609 (1st Dept. 1980). E.g. , Showcase Limousine, Inc. v. Carey , 269 A.D.2d 133, 134 (1st Dept. 2000), mod in part , 273 A.D.2d 20 (1st Dept. 2000); Uribe , 266 A.D.2d at 22 (noting that the failure of the plaintiff to register with the State may be cured prior to the resolution of the action); Credit Suisse Int’l v. URBI, Desarrollos Urbanos, S.A.B. de C.V. , 41 Misc. 3d 601, 604 (Sup. Ct., N.Y. County 2013) (ordering plaintiff to comply with BCL § 1312 within 60 days or face dismissal of its complaint). Slip Op. at *1 (citations omitted). Id. (citations omitted). Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber “The doctrine of forum non conveniens permits a US court to decline to exercise its judicial jurisdiction if the court would be a seriously inconvenient forum and if an adequate alternative forum exists.” 1 The doctrine presupposes at least two forums in which the defendant is amenable to process; the doctrine furnishes criteria for choice between them. 2 “The forum non conveniens determination is committed to the sound discretion of the trial court. It may be reversed only when there has been a clear abuse of discretion.” 3 Under CPLR § 327, which codified the common law doctrine of forum non conveniens , a court may dismiss an action where “in the interest of substantial justice the action should be heard in another forum.” “The doctrine is based upon justice, fairness and convenience . . . and the burden is on the party challenging the forum to demonstrate that the action would be best adjudicated elsewhere.” 4 Among the factors to be considered are the residence of the parties, the location of the transaction giving rise to the cause of action, the applicability of the laws of another state or country, the location of the witnesses and any pending discovery, the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum where the plaintiff may bring suit. 5 “No one factor is controlling,” since the doctrine is flexible in application and “based on the facts and circumstances of each case.” 6 In Brandwein v. Hartig , 2023 N.Y. Slip Op. 04711 (1st Dept. Sept. 26, 2023) ( here ), the Appellate Division, First Department applied the foregoing principles in affirming the dismissal of an action involving Israeli defendants. Brandwein v. Hartig Background Brandwein concerned alleged financial wrongdoing by defendants. Plaintiffs are New York residents, who claimed to be the “Personal Representatives” of the Estate of Zehava Greenberg (“Greenberg” or “Decedent”). At the time of her death in Israel in December 2019, Greenberg was an Israeli citizen, who resided in Jerusalem for several years.  Defendant Michael Hartig (“Defendant”) is the nephew of the Decedent and of Sheldon Greenberg (“Sheldon”), who predeceased the Decedent in Israel. He died in September 2019. Hartig resides in Pennsylvania, though plaintiffs maintained that he was a New York resident. Defendant Koatz is an attorney residing in New York. Plaintiffs alleged that while Sheldon was alive, Defendant manipulated him to use marital assets to purchase an apartment in Jerusalem, without Decedent’s permission, allegedly in violation of Israeli law. According to Plaintiffs, following the purchase of the apartment by Sheldon, Defendant put the apartment in his name. Thereafter, Sheldon and Decedent moved into the Jerusalem apartment.  Plaintiffs claimed that after the purchase of the apartment, while Sheldon was still alive, Defendants allegedly created a fake power of attorney from Decedent to Defendant in order to steal Decedent’s money.  Plaintiffs also alleged that, beginning in August 2019, Defendant improperly obtained funds from a joint bank account maintained by Sheldon and the Decedent, as well as an account in Sheldon’s name. The accounts were maintained by a bank in New York. According to Plaintiffs, Defendant obtained control of the marital bank account and Sheldon’s bank account, while they were both alive, and purportedly stole money from them. Plaintiffs initially filed a complaint against Defendants in the Southern District of New York on October 16, 2020. Among other things, Plaintiffs alleged causes of action for fraud, financial abuse, theft, conversion, and unjust enrichment. Plaintiffs later withdrew the federal action.  Thereafter, Plaintiffs filed an action in state court, asserting similar allegations and causes of action. Defendants moved to dismiss the complaint, pursuant to CPLR §§ 3211(a)(1)(2)(3) and (7) and CPLR § 327(a). On July 12, 2022, the motion court granted defendants’ motion on the grounds that New York was an inconvenient forum for the action.  The First Department’s Decision As noted, the First Department affirmed the motion court’s order, dismissing the action on forum non-conveniens grounds. The Court noted that “ ost of the factors considered by New York courts in deciding whether to retain jurisdiction – the burden on the New York court, the potential hardship on the defendant, the unavailability of an alternative forum in which the plaintiff may bring suit, and whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction — favor a finding that Israel ha a greater stake in, and the proper forum for, th action.” 7 The Court explained that “ ost of the relevant actions occurred in Israel while the decedent and defendant Hartig resided there, the relevant medical records and other documents are written in Hebrew and located in Israel, and the decedent’s heirs almost entirely reside in Israel, as do most of the witnesses and the decedent’s guardian.” 8 As such, concluded the Court, “New York’s retention of jurisdiction would impose a heavy, undue burden upon the court, requiring translation of the Hebrew documents into English and nuanced application of Israeli tort and inheritance law. 9 The Court also noted that because “defendants have consented to Israel’s jurisdiction,” they “would suffer no significant hardship from litigating there.” 10 Finally, the Court rejected plaintiffs’ argument that because they and the bank, as well as some witnesses, were located in New York, New York was the most convenient forum. 11 “The deposition of the New York witnesses and production of the New York Community Bank records,” said the Court, “can be conducted via the internet.” 12 Takeaway The forum non conveniens doctrine permits a court to dismiss an action when “in the interest of substantial justice the action should be heard in another forum.” CPLR § 327(a). It is based upon “justice, fairness and convenience”, 13 in which the party challenging the forum bears the burden of demonstrating that the action would be better adjudicated in a different forum. It is a flexible doctrine that is based upon the facts and circumstances of each case. Only “when it plainly appears that New York is an inconvenient forum and that another is available which will best serve the ends of justice and the convenience of the parties” should a case be dismissed on forum non conveniens grounds. 14 As shown in Brandwein , defendants were able to satisfy the burden reflected in the principles discussed above. here=">here" and="and" >here.=">here."> Footnotes U.S. Department of State, The Doctrine of Forum Non Conveniens in the United States (1997-2001) ( here ) (quoting Gary B. Born & David Westin, International Civil Litigation in United States Courts 275 (2d ed. 1994)). Id. (citing Gulf Oil Corp. v. Gilbert , 330 U.S. 501, 506-507 (1947)). Id. (quoting Piper Aircraft Co. v. Reyno , 454 U.S. 235, 257 (1981)). Grizzle v. Hertz Corp. , 305 A.D.2d 311, 312 (1st Dept. 2003) (citations and internal quotation marks omitted); Islamic Republic of Iran v. Pahlavi , 62 N.Y.2d 474, 479 (1984), cert . denied , 469 U.S. 1108 (1985). Grizzle , 305 A.D.2d at 312; Pahlavi , 62 N.Y.2d at 479; Daly v. Metro. Life Ins. Co. , 4 Misc. 3d 887, 894 (Sup. Ct., N.Y. County 2004). Pahlavi , 62 N.Y.2d at 479. Slip Op. at *1 (citing Pahlavi , 62 N.Y.2d at 479). Id. Id. (citing Estate of Kainer v. UBS AG , 175 A.D.3d 403, 405 (1st Dept. 2019), aff’d , 37 N.Y.3d 460 (2021) (applicability of foreign law is an important factor in forum non conveniens analysis weighing in favor of dismissal)). Id. Id. Id. Pahlavi , 62 N.Y.2d at 479. Silver v. Great Am. Ins. Co. , 29 N.Y.2d 356, 361 (1972). Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By Jonathan H. Freiberger Most often a lawsuit begins with the filing of a summons and complaint or summons with notice.  CPLR 304 .  Once the lawsuit is commenced, the plaintiff is required to serve the defendant(s) with process – the event by which the court obtains personal jurisdiction over the defendant(s).  [This Blog has written about service of process, see, e.g. , < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .]  There are numerous ways in which service of process may be effectuated on a natural person ( CPLR 308 ) and the CPLR also provides for service of process on, inter alia , different types of business and governmental entities (CPLR 307 (State), 308, 309 (infant, incompetent or conservatee), 310 (partnership), 310-a (limited partnership), 311 (corporation or governmental subdivision), 311-a (limited liability company) and 312 (court, board or commission). Once service of process is effectuated, the defendant has a certain amount of time to appear in the action depending on the manner in which service is made.  A defendant can appear by making a formal appearance, which can be done by “serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer.”  CPLR 320 .  Defendants can also make informal appearances, which can have serious implications in litigation.  [This Blog has written about informal appearances, see, e.g., < here =">here"> and < here =">here"> .] If a defendant is served with process, but fails to appear, a plaintiff can seek judgment by default against the non-appearing defendant.  CPLR 3215 .  If plaintiff’s claim is “for a sum certain or for a sum which can by computation be made certain,” a plaintiff can seek a default judgment from the Clerk of the Court if the application is made within 1 year of the default.  See CPLR 3215(a).  A clerk’s judgment requires no inquest.  A “sum certain” in the context of CPLR 3215 “contemplates a situation in which, once liability has been established, there can be no dispute as to the amount due, as in actions on money judgments and negotiable instruments.”  Reynolds Securities, Inc. v. Underwriters Bank & Trust Co. , 44 N.Y.2d 568, 573 (1978); see also Freeport Plaza Realty, LLC v. Freeport Moon, Inc. , 205 A.D.3d 685, 687 (2 nd Dep’t 2022).  Thus, if extrinsic evidence is necessary to calculate damages, a clerk’s judgment is unavailable.  Id.   If the plaintiff does not take proceedings for the entry of default within a year, the court “must” dismiss the action against the non-appearing defendant unless “sufficient cause” is shown for the failure to do so.  CPLR 3215(c); see also U.S. Bank, N.A. v. Onuoha , 162 A.D.3d 1094, 1095 -96.  [This Blog has written about CPLR 3215(c), see, e.g., < here =">here"> , < here =">here"> , < here =">here"> and < here =">here"> .]   The vacatur of a clerk’s judgment is the subject of today’s article.  There are numerous grounds upon which a judgment may be vacated.  See, e.g. , CPLR 5015 .  [This Blog has written about CPLR 5015, see, e.g., < here =">here"> , < here =">here"> and < here =">here"> .]  In order to “vacate a judgment, including a clerk’s judgment, entered upon default in appearing and answering the complaint must demonstrate a reasonable excuse for its delay in appearing and answering, and a meritorious defense to the action.”  Verde Elec. Corp.v. Federal Ins. Co. , 50 A.D.3d 672, 672-73 (2 nd Dep’t 2008); see also Barnett v. Diamond Finance Co., Inc. , 202 A.D.3d 651(2 nd Dep’t 2022).   In Fidelity Nat. Title Ins. Co. v. Valtech Research, Inc. , 73 A.D.3d 686 (2 nd Dep’t 2010), a negligence action, the plaintiff obtained a clerk’s judgment.  The Court found, among other things, that the defendant was not permitted to vacate the default under CPLR 5015 because it “failed to establish a reasonable excuse for that default.”  Id . at 687.  However, the Court also found that plaintiff was not seeking a “sum certain” and, therefore, the clerk lacked authority to enter judgment in Plaintiff's favor.  Id.  Thus, the Court remitted the matter “for an inquest and the entry thereafter of an appropriate judgment.” Id . On September 13, 2023, the Appellate Division, Second Department, decided Pizzarotti, LLC v. Cabgram Developer, LLC , a case involving the vacatur of a clerk’s judgment.  The plaintiff in Pizzarotti obtained a clerk’s judgment exceeding $2,300,000 based on the defendant’s failure to appear or answer the complaint.  The defendant’s motion to vacate the judgment was granted and the plaintiff appealed.  The Second Department in affirming the motion court’s order and noting the short length of the default, stated: Although the general rule is that in order to vacate a default, a party must demonstrate a reasonable excuse for the default and a potentially meritorious defense ( see CPLR 5015 <1> ), the sufficiency of an excuse is not as significant where the default is only a short period. Here, the less than seven-week delay between when the defendant's time to answer expired and when the defendant moved to vacate the clerk's judgment is brief, and there is no evidence that the defendant's default was intentional or part of a pattern of neglect. Moreover, in light of the lack of prejudice to the plaintiff resulting from the defendant's short delay in appearing and seeking to answer the complaint, the existence of a potentially meritorious defense, and the strong public policy favoring resolution of cases on the merits, the Supreme Court providently exercised its discretion in granting the defendant's motion to vacate the clerk's judgment entered upon its default.  Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP commercial litigation attorneys. This article is for informational purposes and is not intended to be and should not be taken as legal advice.